Conservation Payments, Liquidity Constraints and Off-Farm Labor: Impact of the Grain for Green Program on Rural Households in China

37

invested before the program (in 1999) out of concern for measurement error. Consequently, we hereafter
leave behind analysis of the program’s impact on the intensive margin (differences in number of hours
worked) and focus on the extensive margin (whether there was a shift of a family member from the
on-farm to the off-farm sector).

¹² While DID allows us to control for unobserved factors, a disadvantage of this type of reduced-form
approach is that I cannot estimate other interesting parameters such as price elasticities. The main
objective of this study is to evaluate the impact of the Grain for Green program so I chose to take the
DID approach. In addition, this method avoids errors in measurement errors of wage and other prices.

¹³ The household data set includes household size and total land holdings for 1999 and 2004. Changes
in these two variables are observed in only a few households in the sample so including changes in those
variables when estimating DID does not make a significant difference.

¹⁴ The reliability of the DID estimator lies in the identification assumption that there are no omitted
time-varying effects that are correlated with the program. For example, the identification assumption
might be violated if other local governmental programs existed that both affected labor allocation and
were correlated with participation in the Grain for Green program. Unfortunately, I did not have
information to control for other governmental programs and thus had to interpret all results with this
caveat in mind.

¹⁵ The term “persons” is loosely used here. The dependent variable is the head count of household
members with off-farm labor work. Since a household member with any number of hours of off-farm
work is counted as one person, “persons” cannot be defined by hours or full-time equivalents (FTEs).

¹⁶ The number of participating households that were liquidity-constrained and -unconstrained were 170
and 55, respectively, and for non-participating households 32 and 8. The DID estimates for liquidity
-constrained and -unconstrained households were 0.415 (t=1.96) and -0.260 (t=0.70), respectively. At the
individual level, the estimates were 0.132 (t=2.78) and -0.013 (t=0.14), respectively.

<<   36   37   38   39   40   41   42   >>

More intriguing information